Gold Advances as Portugal Rating Cut and Prices Below $1,200 Spur Demand
Gold rose the most in almost a month after Portugal’s credit rating was lowered, boosting demand for precious metals.
Portugal’s debt rating was cut two levels to A1 by Moody’s Investors Service which cited the country’s growing debt burden and weak economic prospects. Gold reached a record $1,266.50 an ounce on June 21 and all-time highs in euros, British sterling and Swiss francs last month amid Europe’s credit crisis.
“The downgrade is a signal to the market that the situation is not over,” said Bernard Sin, the head of currency and metal trading at bullion-refiner MKS Finance SA in Geneva. “There is still long-term fear because of uncertainty.”
Gold futures for August delivery rose $16.20, or 1.4 percent, to $1,214.90 an ounce at 9:51 a.m. on the Comex in New York. A close at that price would mark the biggest gain for a most-active contract since June 17. Yesterday, the price settled below $1,200 for the fourth time in five sessions.
“The Portuguese government’s financial strength will continue to weaken over the medium term,” Moody’s said in a statement, adding that the outlook is stable. Portugal has the fourth-largest budget deficit in the euro region as a percentage of gross domestic product.
“The Portugal news is enough to give gold a boost,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “Gold tried repeatedly to break down below $1,200, but the buyers kept coming back. This is a short-covering rally.”
Bullion Holdings Grow
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, grew for the first time since June 29. The fund added 0.3 metric ton to 1,314.82 tons yesterday, according to the company’s website. Global ETF holdings rose 2.7 tons to a record 2,075.11 tons yesterday, according to Bloomberg data from 10 providers.
Silver futures for September delivery jumped 33.3 cents, or 1.9 percent, to $18.25 an ounce on the Comex.
Platinum futures for October delivery gained $14.80, or 1 percent, to $1,530.10 an ounce on the New York Mercantile Exchange. Palladium futures for September delivery surged $11.85, or 2.6 percent, to $466 an ounce, also on the Nymex.
To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.
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